International Fund for Agricultural Development
Trends in Global Remittances
and Opportunities for Development
Promoting innovative remittance markets and
empowering migrant workers
Adolfo Brizzi
and their families
UNCTAD
Director,
Geneva, 20 June
Policy and Technical Advisory Division
2014
IFAD
Trends in Global Remittances and Opportunities
for Development
1
Remittances Flows and Markets
2
Remittances and Development
3
Conclusions and Considerations
Remittances and Development Opportunities
IFAD and Remittances : Mission statement
Our goal is to:
Increase the financial resources of those who receive
remittances in rural areas,
Maximize the developmental impact of remittances once
received, and
Provide migrants with opportunities to invest their
capital back in their home communities
Remittance Flows
and Markets
Remittances Flows and Markets
The Concept of Remittances
“Remittances are the traditional means of financial support
to family members back home”
“They are the embodiment of a phenomenon in which
People move North or across the South by the millions….
and where money moves back by the billions…”
“They are the result of an integrated international labor market
and are now considered to be the human face of
globalization.”
Remittance Flows and Markets
The Migration and Remittances’ cycle
Consumption, housing
and other non productive
expenditures
Lack of income
generating activities
If not
leveraged
Cycle
continues
and
dependency
is created
Migration
Phenomenon
occurs
If
leveraged
Remittances
trend occurs
Increased
Local Economic
Activity/jobs/income,
Breaking the cycle
Remittance Flows and Markets
Worldwide Flows to Developing Countries in 2013
1.5 billion financial
Europe
transactions a year, US$ 50 billion
..US$ 200 at a time…
Asia
US$260 billion
Africa
US$ 40 billion
Near East
US$30 billion
LAC
US$ 60 billion
Total Flows to Developing countries US$ 440 billion
Remittance Flows and Markets
Migration, Remittances and migrant’s capital
MIGRANT FLOWS: 230 million international migrants worldwide,
RURAL REMITTANCES FLOWS: in 2013, over US$160 billion have
reached rural families in developing countries,
MARKET COSTS OF TRANSFER: US$37 billion the cost of sending
money back home in 2013 (equivalent to the GDP of Kenya),
RREMITTANCE RECIPIENTS INVESTMENTS & SAVINGS: 20% of the
amount sent,
MIGRANT DIRECT INVESTMENT IN AGRICULTURE US$20 billion in
2014 alone, equal to more than 4 times global ODA to agriculture,
CUMULATED REMITTANCES FLOWS: US$ 2.5 Trillion of which
US$ 1 trillion will go to rural poor areas in the next five years.
Remittances Flows and Markets
Impact of Remittances
National economy (macro-level)
- Significant or highest foreign capital inflow in many developing countries
- Stable flow (or “buffer”) during financial crisis
Local economy (meso-level)
- Increased demand for local goods and services
- Can drive local development if saved in local formal institutions
Recipient families (micro-level)
- Lifts millions of people out of poverty by improving standards of living
- Can help families achieve their financial goals through financial education,
savings & investment
Remittances Flows and Markets
Challenges in the Remittance Market:
-ACCESS: poor rural payment networks make it expensive to reach the “last
mile”
-COMPETITION AND INTERMEDIATION are still scarce in a market largely
dominated by a few Money Transfer Operators (MTOs) and with limited
participation of the formal financial sector,
-REGULATION compliance still remains a key issue for many market players
and generates high operating cost,
-USE TECHNOLOGIES, such as mobile payments, is on the rise but requires
investments and have yet to make a impact in the remittance market.
As a result, COSTS are slow in decreasing: Although global average cost has
come down to around 8%, many LDCs (and particularly their rural areas) still
witness costs ranging from 14% to 20% on average.
Remittances
and Development Opportunities
Remittances and Development Opportunities
A general consensus from development practitioners
• Empower market actors and increase competition
• Promote effective and efficient regulation
• Adopt new technologies
• Expand access to financial services
• Make more financial services available in rural areas
through savings and investments
Remittances and Development Opportunities
A stepped strategic approach:
and Objectives
- Public, Private, and People Partnerships
-Diaspora investment (SMEs, Agriculture, etc.)
-Nostalgic trade
-Securitization / Diasporas Bonds
- Financial services linked with remittances
(savings, credit, Insurance, housing.)
- Financial literacy for migrants and families
- Expand payment networks
(MFI, Postal, Banks)
- Innovation and technology
(Mobile, internet-based,..)
- Research and
Market data
- Surveys
- g20,Global Forum R.
Promote investment
mechanism and opportunities
Investment
Expand the variety and usage
of financial services
Financial Inclusion
Promote market competition,
cost reduction, and access
Market strengthening
Promote an enabling environment in
the marketplace
Advocacy and Policy
Remittances and mobile technologies
Over the last five years, several markets in developing
countries have started to integrate these new technologies
in the remittance marketplace
These technology-based payment instruments are playing
a key role in lowering remittance transaction costs and
increasing financial access.
These include, Card-based solutions,
Web portals, Cryptocurrencies,
Mobile transfers, and Mobile wallets, among others
Mobile remittances: where do we stand?
In order to unleash the full potential of new technologies
several aspects remain to be tackled:
• Remittance’s agent cash liquidity and inactive mobile
customers remain a major issue
• Airtime and person-to-person transfer remain dominant
• Mobile money remains largely cash-based
• Small value credit and savings in mobile accounts remain
small
• Linkages with financial services have increased but remain
sporadic (insurance, microfinance, etc..)
Mobile remittances: Policy recommendations
Overall, mobile penetration in the remittance marketplace
will be dependent on efforts that promote:
Customer adoption: further market policies and marketing
strategies that incentivize customer usage are needed.
Customer need to embrace the comparative advantage of
using mobile beyond the simple remittance transaction.
Adequate regulatory framework and compliance:
An adequate regulatory framework that targets the unbanked
client for international transactions is yet to be fully developed.
Remittances and Development Opportunities
IFAD and Remittances: Our experience
•
•
•
•
Almost US$40 million in projects and US$ 28 million multi-donor
programme,
Active in more than 40 countries
Europe
Near East and
50 innovative projects
Albania
the Caucasus
Kosovo
Georgia
Over 200 partners worldwide Moldova
Romania
Latin America
and
the Caribbean
Bolivia
Colombia
Costa Rica
Ecuador
Haiti
Jamaica
Paraguay
Peru
Africa
Benin
Burkina Faso
Cameroon
Ethiopia
Ghana
Madagascar
Malawi
Mali
Mauritania
Niger
Senegal
Sierra Leone
Somalia
Uganda
Asia and the
Pacific
Bangladesh
Cambodia
China
India
Indonesia
Kazakhstan
Kyrgyzstan
Laos
Malaysia
Nepal
Philippines
Sri Lanka
Tajikistan
Uzbekistan
Vietnam
EVENTS
Global Forum on Remittances and Development
2015 - Europe
Milan, 17-19 June, 2015
Promoting innovative remittance markets and
empowering migrant workers
and their families
Conclusions and considerations
• Remittances are private funds.
They are neither a development strategy, nor a
replacement for development assistance
• Development institutions should focus their efforts to
provide migrants and their families with financial options and
tools to allow them to best manage and maximize the impact
of their funds,
• This will empower recipients families and advance them on
the road to financial independence
International Fund for Agricultural Development
Thank you
www.ifad.org
www.RemittancesGateway.org
Promoting innovative remittance markets and
empowering migrant workers
and their families